Support Housing Credit Expansion and Improvement Now

By: Michael Bodaken, President

The Low-Income Housing Tax Credit (Housing Credit) is indispensable for encouraging private investment in the production and preservation of affordable rental housing. Over the past 20 years, NHT-Enterprise has used the Housing Credit to preserve affordable properties and improve and protect the security of our residents.  We are strong supporters of the Affordable Housing Credit Improvement Act of 2017 (S. 548), introduced by Senator Maria Cantwell (D-WA) and Senate Finance Committee Chairman Orrin Hatch (R-UT) this past March.  Now is the time to urge Congress to pass this critically important legislation.

S. 548 is a comprehensive bill to expand and strengthen the Housing Credit. This legislation would increase Housing Credit authority by 50 percent, provide states with additional flexibility, make the financing of affordable housing more predictable and streamlined, facilitate Housing Credit development in challenging markets like rural and Native American communities, and increase the Housing Credit’s ability to serve extremely low-income tenants.

NHT helped to shape important language within the Cantwell-Hatch bill designed to enhance the preservation of existing affordable housing.  We strongly endorse the following provisions, in which the bill would:

• Replace the right of first refusal with a purchase option to facilitate the ability of nonprofits to maintain Housing Credit properties beyond Year 15.  Over the years, the right of first refusal hasn’t always worked as intended and in some cases, nonprofits have been unable to exercise this right.  The bill’s language would permit tenants, a resident management corporation, government agency, or a qualified nonprofit organization to purchase a property or the investor’s partnership interest at the end of the 15-year compliance period, at the same minimum purchase price as defined in current law.
• Include relocation expenses in eligible basis, consistent with the treatment of other indirect costs, to avoid adding unnecessary costs or sacrificing resident safety during rehabilitation.  Relocation costs would include compensation or allowances paid to tenants (regardless of income), as well as payments to third parties for relocation services and temporary housing during the rehabilitation period.
• Provide flexibility for existing tenant income eligibility when the Housing Credit is used to preserve older Housing Credit or other federally, state, or locally financed affordable housing. This provision would allow developers to use Housing Credits to preserve existing affordable housing without reducing the eligible basis of the property, even if the tenants living in that housing have incomes that are at the time of redevelopment above the Housing Credit’s income limitations, so long as they were income qualified when they originally moved into the property and their income has not increased above 120 percent of area median income.  This codifies existing guidance for Housing Credit properties, helps finance the preservation of other federally and state-assisted properties, and eliminates any tension between allowing existing tenants to stay in their homes and recapitalizing the property. 
• Clarify that a community revitalization plan, as included in one of the three required Housing Credit allocation preferences, is determined by the relevant state Housing Credit allocating agency.  The bill requires state agencies to establish definitions and clear parameters of  concerted community revitalization plans, including  whether the plan is geographically specific, includes a plan for implementation and goals for progress, includes a strategy for obtaining public and private commitments in other, non-housing infrastructure or other improvements beyond Housing Credit developments, and demonstrates the need for revitalization before projects located in Qualified Census Tracts are eligible for a basis boost.
• Prohibit approval and contribution requirements. The bill prohibits states from including local approval and contribution provisions as either a threshold requirement or part of a point system in their qualified allocation plans, except to the extent that contributions are taken into consideration as a part of a broader measure of a projects ability to leverage outside investment, and are considered on a level playing field with all funding sources.  In the past, local approval and contribution requirements have blocked Housing Credit projects from moving forward due to NIMBYism.
• Gives states the authority to ensure that affordability restrictions endure in the case of illegitimate foreclosure.  The Cantwell-Hatch billwould allow state housing finance agencies to prohibit the termination of long-term use agreements to restrict rents when the purpose of a transaction is specifically to terminate those agreements.  Currently, the Secretary of the Treasury must determine if a property acquisition was part of an arrangement to terminate the affordability restrictions and not a legitimate foreclosure.  In practice, it is difficult—if not impossible—for the Treasury Secretary to make such a determination about individual properties.  This provision would transfer that responsibility from Treasury to the states, which already are tasked with ongoing compliance monitoring for Housing Credit properties. 
• Increase in credit for certain projects designated to serve extremely low-income households.  The legislation would provide flexibility for state housing credit agencies to increase the basis of projects in which 20 percent of the units are designated for occupancy by households with incomes that are 30 percent of area median income or lower, by up to 50 percent if it is necessary for the project to be financially feasible. This would facilitate greater affordability for extremely low-income households.

The Housing Credit has been an incredible success. The Cantwell-Hatch measure makes the Housing Credit even more useful for housing preservation transactions.

Increasing Housing Credit authority by 50 percent would go far in helping states and mission-driven developers to get closer to meet our nation’s dire need for affordable rental housing.  But the passage of Cantwell-Hatch is not a slam dunk. There is no better way to market Cantwell-Hatch than by providing concrete evidence of what the Housing Credit provides. In the coming months, invite your representative to visit a successful Housing Credit property in your district and urge your Congressperson to support Cantwell-Hatch!